Perpetual Inventory

Posted in Operations and Supply Chain Terms, Total Reads: 163

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Definition: Perpetual Inventory

Perpetual Inventory is the system of inventory which is currently the most preferred type of inventory management system. In this type of inventory management, all changes in the inventory are made real time in the stock keeping books also. Thus, if any there is addition or subtraction in the inventory when purchases and sales are made; changes are made in the book also.

So, perpetual inventory allows us to track inventory real time and the stock in the books and real stock are generally same, it decreases manual checks drastically; however, it is good to check it a times periodically because in case of a theft, the book inventory and the actual inventory might differ. On performing the above mentioned check, if any discrepancy is found, adjustments are made in the book inventory accordingly.

For example: Any material present in the warehouse of the company is also noted in the accounting books of the company and changes being made in the real stock of the material in the warehouse is being instantly updated in the book also. Suppose 500 items of the material was ordered and received in the warehouse, the records in the book are instantly updated and 500 is added there also. This type of inventory management is known as perpetual inventory.